Credit money in today’s uncertain world is one of the most sought-after aids out there to strive through urgent financial hardships. It is an undeniable fact that whether it is credit cards or loans, they are very popular monetary aids that people use in all spheres of their lives. We plan our expenses, desires, and dreams around credit and therefore it becomes essential to be eligible for a good amount of credit.
We all know that the concept of money lending, irrespective of evolution and generation, works on trust. Earlier it was the mutual understanding between two individuals and now it is our credit score that is trusted. A credit score is a three-digit numerical value that reflects your capability to repay credit.
Moreover, it also records your consistency in handling any type of borrowed money. It determines your position financially and banks assess this before sanctioning any kind of loans. Let us understand what factors are evaluated to find your credit score.
Keep Your Credit Score Healthy
Since credit score is the unique estimate of our creditworthiness, it considers every important factor that can predict your credit trajectory.
Repayment History
All four organisations that take out your credit score want information on your past borrowing activities. The amount of credit taken by any means, your track record of successful repayments, and more. Timely paybacks, consistent borrowing, and minimal frauds develop a decent credit score.
Credit Mix
The variety of credit that you can manage also influences your credit score. Bankers trust individuals who have a history of handling multiple credit lines such as different kinds of loans, credit card bills, and more. It determines your reliability with credit and increases your credit score if you have seamlessly dealt with every credit source successfully.
Credit Utilisation Ratio
Understanding your average credit consumption also gives banks an idea of your financial behaviour. Your credit score would take into account the ratio between your credit card balances across all credit cards to your credit card limit. This ratio is known as the credit utilisation ratio. A high ratio can deem you as a risky frequent borrower and a lower ratio could increase your credit score which can help you get better offers from the bank.
New Debt
Any new monetary liability makes you more financially strained and thus increases the risk of lending credit to you. Your credit score would also fluctuate concerning your last and recent credit portfolio. The higher your latest debt is, the lower your credit score considering that you are already financially burdened.
Understanding the Credit Score Range
CIBIL is one of the most prominent credit score-calculating financial organisations whose figure is the most trusted in the market. Your CIBIL score contains multiple ranges of scores indicating various levels of your creditworthiness. The minimum credit score one starts with is 300 and the maximum can be 900. In this range, there are several small categories as follows:
350-549
If your credit score lies in this range, you are deemed to have a very high risk for the banks. This range of scores signifies your lack of ability to handle credit, delay in payments, or loan defaults. This credit score range is considered very poor, and it decreases your chances of availing of any loan from the bank.
550-649
This segment of credit score is average and pushes you to improve on your credit management. A credit score that lies in this range is considered fair highlighting your repayment backlogs. While this is still not the best place to be, it still could get the banks to offer you some amount of loans which if you handle it better, can increase your score.
650-749
This is a good credit score. It depicts your discipline in repaying loans and credit card bills. It considers you as a low risk for banks and as the score touches the higher end of the range, you might be able to get a decent amount of loans at better interest rates than before. Moreover, it motivates one to maintain a strong credit behaviour to further increase your credit score.
750-900
This range is the supreme one. Credit scores lying in this segment denote a very stable financial position concerning credit. Whether it is timely repayments, very little to no monetary strain, or just excellent control over credit processes. This range deems you as a very low-risk borrower who can garner hefty amounts of loans with favourable interest rates.
Check your Credit Score Anytime Anywhere
As we grow in life, it becomes imperative to maintain a strong credit score since it acts as notable financial protection in financial emergencies. It is very simple to find your credit score online with Tata Capital, you can check your credit score on the move with hassle-free experience. So, what are you waiting for, go check your credit score online at Tata Capital right away.